Summary
Two numerical algorithms for the risk analysis of credit portfolios are presented. The first one determines the distribution of credit losses and is based on the fast Fourier transform. The algorithm has a strong analogy to the CreditRisk+ approach, since both the Poisson approximation as well as the technique of forming homogeneous exposure bands are being used. An application to the analysis of collateralized debt obligations is also given. The second algorithm makes use of an importance sampling technique for allocating credit risk contributions according to the risk measure expected shortfall. The coherent risk spectrum that is obtained by varying the loss exceedance level is introduced and its properties are discussed.
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Merino, S., Nyfeler, M. (2004). Numerical Techniques for Determining Portfolio Credit Risk. In: Gundlach, M., Lehrbass, F. (eds) CreditRisk+ in the Banking Industry. Springer Finance. Springer, Berlin, Heidelberg. https://doi.org/10.1007/978-3-662-06427-6_17
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DOI: https://doi.org/10.1007/978-3-662-06427-6_17
Publisher Name: Springer, Berlin, Heidelberg
Print ISBN: 978-3-642-05854-7
Online ISBN: 978-3-662-06427-6
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